Impact The Forests

Contents | Methodology | Context and opportunities | Opportunities for innovation | Next steps | Glossary and Acronyms | References
IMPACT IN The potential for business

solutions to combat
THE FORESTS
deforestation in large
forest landscapes in Asia:
a progress report
1 | Impact in the Forests

FOREWORD
The authors of this innovative report remind us
that for sustainable forest management to work in
the long term it must make business sense as well
as ecological sense.
But looking at entrepreneurs on the ground in three Asian countries they note
that with the exception of the Forest Stewardship Council (FSC), most innovations
are small-scale, low impact and donor-driven. They make the observation (which
is painful for us in the forest sector) that there is more innovation in the energy
sector. It’s clear that there is no lack of committed and innovative entrepreneurs,
NGOs and community and indigenous organizations on the ground. The
challenge is that the alternative economic approach they promote has traditionally
been at cross-purposes with the large-scale development plans of estate crops.
We see some hope that this situation is now changing. In the palm oil industry in
Indonesia for example, a number of larger companies have made commitments
to “zero deforestation, zero social conflict and zero peat”. The sustainability
commitments from plantation and forestry sectors have been supported by
international buyers and the Indonesian government.
The industry also wants to work with smallholders who provide 40% of
Indonesia’s palm oil and who urgently need technical assistance to improve
planting stock, agricultural methods and business practices. Cooperatives need
to be strengthened and access to capital facilitated. This is fertile ground for the
entrepreneurial approaches explored by the actors of “Impact In the Forests”.
It would have the potential to bring impact at scale that the actors correctly note
has been missing to date, to make a real impact on deforestation for the benefit
of the forests, people, economies and environment.
Nazir Foead, Head,

Indonesian Peatland Restoration Agency (PRA)
Chris Elliott, Executive Director,

Climate and Land Use Alliance (CLUA)
In the palm oil industry in Indonesia for example,

a number of larger companies have made
commitments to “zero deforestation, zero
social conflict and zero peat”. The sustainability
commitments from plantation and forestry sectors
have been supported by international buyers and
the Indonesian government.

CONTENT All the titles below are hyperlinks -

click on them to navigate the document.
Foreword 2
Executive summary 5
Partner profiles 11
Introduction 12
METHODOLOGY 16
Case study: Peatland Restoration, Kalimantan, Indonesia 18
CONTEXT AND OPPORTUNITIES 20

Problem and situation analysis 20
Policy and entrepreneurial context 21
Landscape programmes 23
Table 1: Summary of landscape programmes 24
OPPORTUNITIES FOR INNOVATION 26

Innovation analysis: Hypotheses 26
Figure 1: A conceptual model for Impact In the Forests 27
Case study: Sustainable travel enterprise, Nepal 29
Taxonomy of innovation actors 30
Figure 2: Taxonomy of innovation actors 30
Innovation analysis: Sectoral analysis 32
Table 2: Sectoral analysis of the landscapes in IIF 32
Case study: AHP herbal products, Nepal 34
Innovation analysis: Innovators 35
Case study: Sustainable rattan production in Lao PDR 36
Innovation analysis: Investors and revenue models 37
Table 3: Analysis of investors in the three landscapes 38
Innovation analysis: Connectors 39
Case study: Hydrologic in Cambodia 40
NEXT STEPS 42
Box: Expected outcomes over the next 3-5 years 43
Case study: Harapan Forest in Sumatra, Indonesia 44
Next steps: Developing effective sustainable businesses 45
Next steps: Developing filters 46
Figure 3: Filters for IIF projects 46
Table 4: Examples of criteria and indicators for IIF filters 47
Case study: Biogas programme, Vietnam 48
Next steps: Monitoring 50
Box: Management metrics 50
Box: Each project needs to be judged on its own merits 50
Case study: Inclusive business accelerator, Vietnam 51
Conclusions 52
Glossary and acronyms 54
Annex 1: Non exclusive list of investment funds 58
References 59

© Raphaele Deau
WWF staff working in a natural bamboo forest, Eastern Plain Landscape, Cambodia.

EXECUTIVE SUMMARY
The UN’s 2015 Sustainable Development Goals aim
© Soh Koon Chng / WWF-Canon

to halt deforestation by 2020. This is unlikely to be
achieved by action by the public or civic sector alone.
This report is based on the assumption that developing successful businesses
that actively or incidentally help to maintain natural forest cover is a key step to
eliminating deforestation. Such businesses will often also contribute positively
to address other environmental, social and economic needs. We define
deforestation-free business models as any for-profit business enterprise that can
operate without directly or indirectly causing deforestation or forest degradation
and/or contribute to forest and land restoration. Working to kick-start sustainable
and scalable business models, which are successful enough to make a significant
reduction in deforestation, requires a new approach.
This report is the product of collaboration between four organizations from very
different sectors – WWF on the environment, Ennovent on business innovation,
the Impact Hub on development of local entrepreneurial ecosystems and
Stripping Cinnamon Bark. Jambi Clarmondial (in association with GreenWorksAsia) on financing for sustainable
Province, Sumatra, Indonesia. development.
The “Impact In the It focuses on three key biodiverse countries and landscapes as cases that
represent the range of conditions across Asia. These include:
Forests” report explores
pathways to unlock • Vietnam: particularly the Central Truong Son area around the Annamite
business solutions for Mountains.
deforestation-free trade • Indonesia: focusing on inland Kalimantan on the island of Borneo, and
chains in Asia. on the island of Sumatra.
• Nepal: particularly in the lowland area that forms part of the transboundary
Terai Arc region.
The report provides a situation analysis of the environmental, social and political
conditions in each of the landscapes, along with the policy and entrepreneurial
context. It discusses the potential for innovative approaches in these landscapes
and explores enterprises and sectors that might contribute positively to
addressing deforestation. Finally, it looks at the various actors (innovators,
investors and connectors) who might be involved. Real-life examples are cited
throughout.
The key findings are as follows:
1. Across the three focal countries and landscapes, the proportion

of enterprises found that directly contribute to reducing pressure on
deforestation is very low; and these do not tend to have impact at
large scale. Business incentives remain much stronger for promoting
deforestation than preventing it.
A range of case studies demonstrate that deforestation-free business solutions

do exist and can have impact including:
• Biogas production to replace woodfuel in Vietnam and inclusive business

accelerators linked to this

• Sale of water filters to improve health and reduce woodfuel use in Cambodia
• Sustainable rattan production in Lao PDR
• Peatland restoration in Kalimantan
• Harapan forest restoration enterprises in Sumatra
• Sustainable travel enterprises in forest regions in Nepal
• Sale of locally produced herbal products in Nepal
However these tend to be isolated cases and struggle against business

incentives that promote deforestation such as the high price of oil palm,
the profitability of non-indigenous timber plantations and limited business
infrastructure. While efforts to address environmental issues through social
enterprise are developing rapidly in the region, specific links to deforestation
are less common.
40,000
2. While challenges remain, there is a strong foundation of forest related
enterprises in all three countries and opportunities exist for building and/or
scaling to deforestation-free. Incentives are needed to accelerate them.
MICRO-ENTERPRISES
Nepal for instance has over 40,000 micro-enterprises, two-thirds of which
are linked to timber, non-timber forest products (NTFPs), ecosystem services
and ecotourism. Many of these are run by women. But these are frequently
Nepal has over 40,000 donor-driven, rarely gain any scale, and social enterprise is just starting to
micro-enterprises, two- gain momentum.
thirds of which are linked
to timber, non-timber Vietnam has a strong forestry and agriculture sector but it also has continuing
high rates of negative impacts on the few remaining natural forests. Limited value
forest products (NTFPs), adding of products is undertaken. Investment is emerging from the private sector
ecosystem services and (increasingly conservation led), donors, and state-owned banks. However there
ecotourism. Many of these is poor market readiness, a focus on small projects and restrictive policies on
are run by women. foreign investment.
In Indonesia, innovators face similar barriers, such as a lack of alternative

business models and connections to markets, few scalable projects and limited
access to start-up capital. Investors exist, including some impact funds, and
many donors are active. Local banks are conservative and generally reluctant
to fund micro-enterprises. Investments are actually declining, though new
regulations may change this.
While there are challenges (limited deal flow, regulations and enforcement),
opportunities do exist and can be identified and developed by stakeholders that
are operational on the ground and understand the local context. The seeming
increase in interest from impact oriented investors and donors / philanthropists
to support such initiatives is a positive signal and may facilitate development
of these businesses by providing concessional capital to get them started and
achieve investment readiness.
3. A number of pathways for business scaling and aggregation were

identified from the cases. Some of these are restricted to specific sectors
but all deserve more concentrated attention. Sectors with greatest potential
include rubber, cocoa, rattan, essential oils, medicinal plants and low
carbon technologies.
The success of the model proposed by the IIF project depends on the ability
to identify and scale new or hitherto small ventures into operations that make a
landscape-scale impact. Scaling up routes could be, for instance:

• Across geographies, bringing many different small-scale operations into a

single sustainability-oriented supply chain as is being discussed for rubber
in Sumatra;
• Along trade chains, for instance with cocoa, building added financial
value for products from plantations that do not contribute to deforestation;
• Through cross-industry coordination, as with certified timber and
wood products;
• By adding a technological component to boost efficiency, such as
introducing electronic surveillance methods to prevent illegal logging and
land use monitoring;
• By innovation, developing new supply chains etc., such as building demand
for high quality chocolate products, or new pharmaceutical and cosmetic
products from certified essential oils;
• Through creating new markets, e.g. for certified produce (protecting high
carbon stocks, supporting biodiversity corridors, ensuring zero deforestation
in the production);
• By providing access to new markets, both in the context of products
(e.g. supporting links to new buyers) and financiers (e.g. connecting with
impact investors).
4. Equally valuable is the provision of support services for business model

development, connections with investors, and innovation exercises that
link large markets and companies with smaller operators who can generate
scalable solutions to the challenge of deforestation.
There is local interest and potential for developing innovative solutions tackling
deforestation and some successful models do exist. However solutions fail
to reach scale due to lack of support for business innovation, and investment
readiness. Equally, demand-side interest in financing such solutions fails to
translate into investment because of insufficient “quality” deal flow and poor
product structuring.
An end-to-end, comprehensive approach will overcome obstacles that more

narrowly focused initiatives face by covering the entire innovation funnel,
identifying effective models, and advancing impact metrics to measure progress
and facilitate adaptive management.
5. These services are provided by a limited number of incubators,

connectors, innovation agents and business development services. Very
few of these exist in Asia and most are found in urban areas. Efforts to
build deforestation-free supply chains and green businesses must focus
on extending and equipping this ecosystem of services and connecting the
range of non-monetary services.
Four types of services are identified and explored:
• Innovators: entrepreneurs who develop a deeper understanding of social

and environmental issues, and design, develop and scale solutions to
tackle these challenges and their root causes with innovative approaches.
Innovators can come from any sector, industry, educational background and
social context.
• Incubators: companies that help new and start-up companies to develop by
providing services such as management training or office space.
• Connectors: organizations or skilled individuals, often seconded from
business, working with start-up companies to help them build partnerships
to maximize their effectiveness.

• Investors: In the context of this report, investors include any organization

that provides capital to a business working towards generating financial,
environmental and social returns, with the expectation of both future financial
and measurable non-financial returns (impact) to the investor.
While each of these is individually important, our hypothesis is that the

combination of the four in a coordinated ecosystem of support is most likely
to produce long-term results. However this depends on a comprehensive and
sustained programme that builds a linked ecosystem of services. Sustainability
can be attainable through a strong community platform (with a sustainable
business model), programming that recovers costs, investment vehicles that
generate return on investment and enduring changes to the policy framework.
An end-to-end, 6. Public sector investments for business development, emissions

reductions, restoration and sustainable development have a role to play
comprehensive approach in this process by financing new products and services, entrepreneurial
will overcome obstacles support systems and innovation processes. However this will require a
that more narrowly focused more positive and proactive attitude and policies towards private sector
initiatives face by covering engagement.
the entire innovation funnel,
Public financing for climate and land use has risen to US$20-30 billion (through
identifying effective models,
mechanisms such as the World Bank Carbon Fund, Green Climate Fund) and
and advancing impact over US$100 billion is expected to flow annually by 2020. For the first time, there
metrics to measure progress is a real opportunity for landscape approaches to conservation being put into
and facilitate adaptive practice at scale, with public funds available to help them get established. The
management. three focal landscapes in this report are the subject of the first landscape scale
forest and climate (REDD+) programmes in Asia coving over 20 million hectares
of land and aiming to reduce emissions by over 60 million tonnes CO2e. Over
US$260 million has been allocated to these efforts.
However, public sector financing tends to benefit public sector solutions and
there is a limited focus on private sector needs or approaches. While this is
changing, only a few of the world’s largest companies are likely to be able to
access these funds in the short term and there is currently effectively no attention
to SMEs and entrepreneurs. A change in the structuring of public investment
policies is needed to address this gap and stimulate entrepreneurial solutions.
This in turn requires a change in mindset from public and multilateral institutions.
There is a deep cultural and understanding divide between the public and private
sector. These are two worlds that operate very differently, with deeply different
languages and processes. This report aims at core to begin to build bridges
across this gap and to foster the process of translating between these “tribes”.
Much more fundamental cross-learning is needed.
7. Private sector investment is already available for “green” business.

However it struggles to find investable opportunities at a scale equivalent
to fiscal supply and is hampered by a diversity of understandings of what is
“green”. Clearer standards, monitoring systems and aggregation services
are required.
The private sector is also moving rapidly to take up the challenge of climate and
land use change with initiatives in the labelled green and climate bond market
(valued globally at US$597.7 billion in July 2015); internal carbon pricing; investor
concern with carbon-intensive stranded assets; and insurance companies scaling
up to respond to anticipated climate impacts. But financiers still struggle because
of the opportunity costs of these deals and the risk-return profiles, so blended

capital is needed to make them investable. In the report we present a number of

small-scale businesses that have benefitted from public finance that allows them
eventually to operate as independent businesses.
Across all countries it is easier to find funds than it is to find robust projects in
which to invest them. Although the focus is on business, collaboration with the
government is essential, including at local level to ensure development of
project ideas.
8. The creation of forest friendly business at large or small scale is an

undertaking that has barely begun. An initiative is now needed to build
an evidence base for effective solutions and processes and to foster an
ecosystem approach to linking services, policies and incentives.
Positive progress depends on:

• Identifying potentially suitable business models and innovators
• Accelerating innovative solutions to achieve significant scale
• Facilitating an integrated and beneficial combination of public and
private financing
• Measuring impact and ensuring that businesses deliver promised
environmental and social benefits
• Promoting success stories to users, entrepreneurs, innovators,
businesses and donors
• Connecting top-down actors (institutions, policy makers, funds, etc.)
and bottom-up innovators
• Providing input to policy making that encourages green business models
• Ensuring buy-in for green approaches from businesses engaged in the
landscape
• Replicating successful models in other places impacted by deforestation
Achieving zero net deforestation will not be easy. A surprising number of the
projects considered, whilst often providing excellent social and/or environmental
impacts nonetheless had little direct impact on deforestation. And the number of
businesses with potential environmental returns is a small fraction of the overall
marketplace. Developing deforestation-free social enterprises remains in its
infancy. But there is also a rapid and very encouraging growth of interest in the
possibilities of business models that reduce deforestation, a new generation of
entrepreneurs ready to take risks and build successful business models, and a
global policy framework that supports such efforts. Events are likely to move
quickly in the next few years. There is a huge amount yet to learn and much
focused work ahead to build an effective system for achieving Impact In the Forests.
There is a deep cultural and understanding divide between the

public and private sector. These are two worlds that operate
very differently, with deeply different languages and processes.
This report aims at core to begin to build bridges across this gap and to
foster the process of translating between these “tribes”.

© Mauri Rautkari / WWF-Canon
Woman carrying fuelwood Kerinci area Sumatra, Indonesia.

PARTNER PROFILES
Clarmondial is an independent investment advisory company that focuses
on practical, profitable and creative solutions for social and environmental
businesses and their funders. Established in Switzerland in 2010, Clarmondial
delivers tailored advice, including investment structuring, strategy and business
development support.
Ennovent is a global innovation company for low-income markets. We work

with our clients, partners and community to jointly develop, fund and implement
customized innovation solutions that create a sustainable impact and fair profits.
These solutions discover, start-up, finance and scale the best innovations for
sustainability in developing countries. Since 2008, Ennovent has accelerated over
250 innovations in 15 countries through around 60 solutions.
GreenWorksAsia (GWA) is a private company providing comprehensive

sustainability services, ranging from environmental and social risk assessment to
business planning and project finance advisory services. GWA advises public and
private sector stakeholders in key sectors such as Renewable Energy, Agriculture
and Land-Use, Infrastructure and Climate Finance.
Impact Hub is a global network of entrepreneurial communities, workspaces and

programmes that inspire, connect and catalyze social and environmental impact.
Developing local entrepreneurial ecosystems and supporting ventures from
idea to operations and scale, Impact Hub hosts a diverse community of 12,000
members in more than 80 cities around the world.
WWF is one of the world’s leading nature conservation organizations with over
5 million supporters and a global network active in more than 100 countries.
WWF’s mission is to stop the degradation of the planet’s natural environment
and to build a future in which humans live in harmony with nature, conserving the
world’s biological diversity, ensuring that the use of renewable natural resources is
sustainable, and promoting the reduction of pollution and wasteful consumption.

INTRODUCTION
The UN’s Sustainable Development Goals (SDGs),
agreed in 2015, aim to halt deforestation by 20201 (like
WWF’s goal of Zero Net Deforestation and Degradation
by 20202).
127-170
The Global Commission on the Economy and Climate (New Climate Economy
Report) says that action on agriculture, forests and land use change can reduce
greenhouse gas emissions by up to 10.4 gigatonnes carbon dioxide equivalent
MILLION HA
(GtCO2e) per year by 2030.3 It estimates that achieving the Bonn Challenge
goal of restoring 150 million hectares (ha) of degraded land could generate
additional agricultural incomes of US$36 billion, feed up to 200 million people
WWF estimates that and store about 1 billion tonnes of CO2e per year by 2030. Global goals are
increasingly matched by national government policies, and commitments from
under a business as usual
globally important consumer goods companies. Yet deforestation continues and
scenario 127-170 million government pledges are often not followed through in practice. WWF estimates
ha will be lost from 2010 that under a business as usual scenario 127-170 million ha will be lost from
to 2030. 2010 to 2030, primarily from 11 major deforestation fronts.4 Halting deforestation
needs responses from governments, donors, NGOs and businesses: addressing
the drivers of deforestation such as agricultural supply chains and woodfuel
use, expanding and effectively managing protected area networks, sustainably
managing the remaining forest estate and restoring forests that have been
degraded or destroyed.5
For sustainable forest management to work in the long term, it should make
business sense as well as ecological sense. It is unrealistic to maintain forests by
indefinite grant funding. Businesses have to choose whether they embrace efforts
to tackle deforestation and climate change in their business models6 and whether
to engage with the new low carbon economy model emerging from the international
climate negotiations in Paris in 2015. Scientists and innovators have demonstrated
viable for-profit business models that address deforestation. But so far, with the
exception of voluntary forest certification schemes like the Forest Stewardship
Council (FSC), most innovations remain small-scale, donor-driven and make little
impact on overall deforestation. Most private finance initiatives addressing climate
change focus on energy production rather than on land use change,
deforestation and carbon sequestration and storage, due to the risks attached.7
This is likely to change: major policy initiatives such as REDD+ and new
public and private funding streams address land use change under climate
change. Public financing for climate and land use has risen to an estimated
US$20-30 billion through initiatives such as the World Bank Carbon Finance
Unit and the Green Climate Fund. A recent analysis identified 21 multilateral
funds and initiatives supplying climate finance, along with seven bilateral funds
aimed explicitly at climate finance, involving 29 implementing agencies.8 While
many fund energy initiatives, a growing number cover land use. Countries
have committed to increasing climate finance to US$100 billion per year from
public and private sources by 2020. There are also many national or regional
For sustainable forest management to work in the long term, it should

make business sense as well as ecological sense.
© Edward Parker / WWF-Canon

East Kalimantan (K. Timur), commitments, for instance by the billion dollar Amazon Fund and a major growth
Kalimantan (Indonesian Borneo),
Indonesia.
in investments at the jurisdictional or landscape scale (BioCarbon Fund). For the
first time in history, the landscape approaches that conservation organizations
have advocated for years have a real opportunity of being put into practice, with
larger public funds available to help them get established.
The private sector is also moving rapidly to take up the challenge of climate
and land use change. Six key trends can be identified: (i) financial commitments
building on the 2015 UN Framework Convention on Climate Change (UNFCCC)
Conference of Parties (COP) in Paris; (ii) the emergence of the labelled (green and
climate) bond market; (iii) companies adopting internal carbon pricing; (iv) investor
concern with carbon-intensive stranded assets; (v) the emergence of company
commitments to deforestation-free supply chains; and (vi) insurance companies
scaling up product development and asset management efforts to respond
to anticipated climate impacts.9 For example, as of July 2015, climate-aligned
bonds total US$597.7 billion, including US$65.9 billion in the Labelled Green
Bond Universe.10
The Impact In the Forests initiative is based around the overall hypothesis that
developing successful businesses based near a permanent natural forest estate
is a key part of any strategy to eliminate net deforestation. Furthermore, such
businesses need to fulfil environmental, social and economic needs: in other
words not only reduce deforestation but also be pro-poor, guided at least to
some extent by local communities and address social, cultural and gender
inequities. To make a significant impact, these businesses need to be quite large,
although this can either be through a collective or co-operative approach between
many small businesses or new policies from an existing large business concern.

The Impact In the Forests (IIF) initiative involves collaboration between four very
different organizations, all seeking to support innovative solutions at scale to
address climate change, deforestation and land degradation. It is the first step in
a journey combining the perspectives of these organizations and their networks
to identify and develop business-oriented options to control deforestation. The
overall aim is to define viable business models to enable innovators to scale
through public and private finance, and to access non-financial resources such as
incubators, accelerators and business development service providers. It explores
pathways to enable deforestation-free business solutions with measurable impact
at the scale of millions of hectares of forest and millions of dollars of traded goods.
This report defines deforestation-free business models as enterprises that can

operate without directly or indirectly causing deforestation or forest degradation
and/or contribute to forest and land restoration. They might include local
businesses that can be scaled up, groups of different small businesses working
in partnership and new innovations from large corporations. Working to kick-start
sustainable and scalable business models requires a radically different approach
from conventional conservation models. In the long term, the IIF initiative aims to:
• Identify high-potential local business models and innovators

• Accelerate innovative solutions to achieve scale
• Facilitate an integrated and beneficial combination of public and private
(blended) financing
• Measure impact and ensure that businesses are delivering the promised
• Promote success stories to make forest-focused innovation attractive
to relevant stakeholders
• Connect top-down actors (institutions, policy makers, financiers, etc.) and
bottom-up innovators and coordinate trade and financial chains in
a landscape approach
• Provide holistic input for policy making
• Ensure buy-in for green approaches at every level of businesses engaged
in the landscape
• Replicate successful models in other places impacted by deforestation
The longer-term vision is a comprehensive business facilitation approach

Sustainability will supporting solutions addressing deforestation throughout the innovation process.
be encouraged by Specific business ideas and innovation approaches will be tested initially
focusing on business within selected landscapes, with the assumption that these landscapes are
representative of the wider set of circumstances across Asia that would need
opportunities that to be addressed to support deforestation-free production. A focus is taken first
have the potential to on specific commodities and sectors with high impact potential on ecologically
generate appropriate important forest landscapes and thus the potential to provide a demonstration
of success. These landscapes are among the highest priorities for biodiversity
Return on Investment protection and all exist in places with long-term political commitment to
as well as tangible addressing deforestation. Locally-driven business development support will be
ecological impact. linked to programmes that cover start-up costs. Sustainability will be encouraged
by focusing on business opportunities that have the potential to generate
appropriate Return on Investment (ROI) as well as tangible ecological impact. In
the future, the process may be scaled up further by replicating the best aspects
of these landscape approaches in other sectors and geographies. The use of
positive business models needs to be applied alongside supportive policies and
good governance models to provide a framework within which social enterprises
can compete with short-term high profit deforesting approaches.

© Elizabeth Kemf / WWF-Canon
Girls collecting wood in Ban Don in Vietnam’s Central Highlands in buffer zone of Yok Don National Park
near the Cambodian border.

METHODOLOGY
The potential for green business innovation to reduce
deforestation was explored in three forest landscapes
in Asia, as models for the region as a whole.
These were chosen because (1) they are all very large landscapes in countries
that have made significant national commitments to addressing forest loss and
climate change; (2) they are landscapes in which WWF has existing programmes;
and (3) there are other competent local partners operating, providing
opportunities for developing multi-stakeholder platforms. The landscapes are:
• Vietnam: particularly the Central Truong Son area around the Annamite
1%
Mountains;
• Indonesia: focusing on inland Kalimantan on the island of Borneo, plus
Sumatra and Sulawesi;
Terai Arc region, which also covers other parts of Nepal, India and Bhutan.
All three landscapes have received significant climate change funding: Indonesia
Estimates suggest that is the top recipient in Asia, while Vietnam and Nepal are both in the top ten in
Asia.11 Estimates suggest that if private sector driven innovations can reduce
if private sector driven
deforestation rates in the three target landscapes by just 1 per cent, there will
innovations can reduce be emission reductions in the order of 100 MtCO2 between 2010 and 2030.
deforestation rates in the
three target landscapes by Once selected, background research was carried out in each, following a
just 1 per cent, there will similar pattern:
be emission reductions
• A literature review covering issues relating to policy and regulations,
in the order of 100
business, start-up, climate finance, forestry, Agriculture, Forestry and Other
MtCO2 between 2010 Land Use (AFOLU) interventions, Non-Timber Forest Products (NTFPs) and
and 2030. forest products;
• Interviews with entrepreneurs, innovators, incubation platforms where they
exist, potential financiers, donor organizations, and the local business
community;
• Initial scoping of existing and potential business innovations with the potential
to operate at a large enough scale to make significant differences in forest
cover and carbon budgets.
As a first step towards scoping the potential opportunities, each landscape

was analyzed by experts to identify the extent and drivers of deforestation, the
policy context and opportunities, and the various elements needed to develop
green business solutions to deforestation. Some case studies also emerged in
neighbouring countries. The information is drawn together to develop a strategy
for further developing business innovation for climate and environment benefits
into the future.

SABAH
BRUNEI
NORTH
KALIMANTAN
MALAYSIA
SARAWAK
WEST EAST
KALIMANTAN KALIMANTAN
Samarinda
Balikpapan
CENTRAL
INDONESIA KALIMANTAN
Focus landscapes
including intact forest
landscapes (large remaining SOUTH
blocks of undisturbed KALIMANTAN
contiguous forests).
Key Indonesia East Kalimantan Province
intact forest landscapes

focal landscapes TIBET
country boundary
NEPAL
Kathmandu
TERAI ARC
INDIA
Nepal Terai arc landscape
VIETNAM
NORTHERN
REGION
LAOS
THAILAND
CAMBODIA
Vietnam Annamite range landscape

CASE STUDY
© Simon Rawles / WWF-Canon

Katingan Peatland
Restoration and
Conservation
Project, Kalimantan,
Indonesia
Using carbon credits

to preserve fragile
peat habitat while
maintaining local
livelihoods
Logs being rafted, East Kalimantan, Borneo.
Business model: the Katingan Project12 is managed by an Indonesian company,

PT. Rimba Makmur Utama, through an Ecosystem Restoration Concession
granted by the Indonesian Ministry of Forestry. This is one of the first REDD+
projects for voluntary investment in Indonesia. It is a Verified Carbon Standard
(VCS) accredited project. Funding is based on precise calculations of carbon
stored in the ecosystem and is performance-based; payments depend on peat
remaining intact. The project aims to restore 149,800 ha of peatland. Direct
partners include Permian Global investors, which is a major funder, the Puter
Foundation based in Bogor, Wetlands International, Starling Resources, an
Indonesian-based consulting group, the Orangutan Tropical Peatland Project
and Emily Readett-Bayley, a designer who uses NTFPs from the area.
Environmental model: the area is home to many threatened species including

orang-utan and proboscis monkey; the project aims to promote enhanced
natural habitats and ecological integrity. Restoration of the area is expected to
result in avoidance of an average of 7.5 million tons of greenhouse gas emissions
annually, along with stabilizing water flows and producing clean water.13
Social model: efforts are made to build jobs and value for the 34 villages in the
buffer zone.14 Emily Readett-Bayley has set up workshops to provide alternative
employment for illegal loggers who cultivate rattan in the forest.¹5 The project
aims to provide improved quality of life and reduced poverty of the project-zone
communities through the creation of sustainable livelihood options and economic
opportunities; stronger community resilience through increased capacity to cope
with socio-ecological risks; and enhanced ecosystem services for the overall well-
being of the project-zone communities through ecosystem restoration.

Women with new yield of rice in Ky Thuong village not far from Ho Ke Go in Central Vietnam.

CONTEXT AND OPPORTUNITIES

Research began by assembling strategic information
on the challenges and opportunities in the three
landscapes.
Problem and situation analysis

Asia is experiencing rapid economic growth, albeit in a political and
economic climate that has often failed to build good governance or to
address widespread corruption. Economic growth is also contributing to net
deforestation; the high profitability of palm oil, and other plantation crops such as
Acacia mangium and Eucalyptus makes it hard to find sustainable businesses
that can compete. Although Vietnam and parts of China are now increasing the
total area under trees, this is still often at the expense of forest quality (plantations
replace natural forests) and relies on high levels of imports from neighbours.16
General conditions are illustrated by the example landscapes. Each faces acute
problems of natural forest loss, but their causes, trends and historical trajectory
are different.
43%
Vietnam: need to protect remaining natural forest fragments, encourage
restoration and add value to secondary forest and plantation timber. In
Vietnam, much deforestation is historical, due to the American War (including by
defoliant spray17) and subsequent rapid development. Almost all primary forest
PRIMARY FOREST
has gone; 43 per cent was lost from 1973 to 2009,18 including over 100,000
ha of mangroves.19 Area under trees is now increasing, by 129,000 ha/year
from 2010-2015,20 mainly as timber plantations (Eucalyptus and Acacia) and
Lost in Vietnam from regenerating secondary forest. Natural forest continues to decline in area, quality
and by fragmentation. Restrictions on logging natural forests coupled with rapid
1973 to 2009 during the economic growth (land being switched to agriculture output such as coffee)
American War. have made Vietnam a major importer from Lao PDR, Cambodia and Myanmar,
importing an estimated 49 million cubic metres of timber a year,21 increasing
regional deforestation. Much plantation timber is felled young, for low-grade
uses like wood chips; a situation made worse by government support that has
encouraged new planting rather than management. A major challenge is how to
add value to an existing timber and non-timber forest product chain.
Indonesia: need to find sustainable forest uses that compete with

palm oil, which is still driving forest loss; some islands are virtually
deforested, others still being opened up. Indonesian forests are extremely
rich in biodiversity but under huge pressure, particularly from palm oil,22 but also
pulp,23 mining and smallholder agriculture.24 Logging25 and fire-setting26 open
forests for plantations. Conditions vary between islands. Kalimantan in Borneo
has 3.7 million ha of forests, with supposedly a third conserved, 60 per cent as
production forest and 8 per cent of convertible area.27 But weak governance
and lack of enforcement of regulations and laws allows clearing of “permanent”
forests and with potential to lose up to 45 per cent of peat forest by 2030,28
leading to huge carbon emissions. WWF projects that Borneo as a whole could
lose 22 million ha more forests by 2030.29 Locally policy makers, including in
Sumatra, and especially Riau province, have become concerned about the
dominance of the palm oil industry. By 2014 the island had lost 55 per cent of
its natural forests, particularly in the lowlands.30 Deforestation follows a pattern:
selective logging, further illegal logging and then official rezoning or migrant

settlement. All forests in Sumatra are in danger and WWF projects that 5 million
ha more could go by 2030.31 The major challenge for sustainable forest enterprise
is to compete with highly lucrative international commodities such as palm
oil, particularly where smallholders live in areas where there appear to be few
economic alternatives.
Forest losses are caused Nepal: need to create a socio-economic culture that scales up
sustainable forest enterprises to generate enough value to provide
by high population growth, strong incentives against deforestation. The Terai in Nepal is low, flat
poverty, migration from the land in the south covering a fifth of the country, with forest cover just over 40
uplands, prolonged political per cent (14 million ha), varying from dense rainforest to drier, open forests.
insecurity and weak Acute deforestation continues, with forest cover falling 1.1 per cent a year from
institutional capacity. 1990-201532 and forests increasingly fragmented. Seventy per cent of the Terai
population practise agriculture, mostly on less than one hectare. Forest losses
are caused by high population growth, poverty, migration from the uplands,
prolonged political insecurity and weak institutional capacity. Community forestry
is successful in maintaining forest cover in places33 but only accounts for a small
part of both National Forests and other public land. There are thousands of small,
informal, household-level or group-led enterprises, often donor-supported. The
challenge is to scale up local forest enterprises to provide concrete incentives for
maintaining forest cover, whilst ensuring that forests perform multiple functions
including biodiversity conservation and provision of ecosystem services.
Policy and entrepreneurial context

All the landscapes are undergoing rapid economic
growth and political change. Governments vary in the
extent to which they are democratic and centralized.
None of the countries as yet has an explicit, vibrant
social enterprise culture, but interest and initial stirrings
occur in all three.
Vietnam: forest enterprises are state-owned and focus on fast-growing
plantations; recognition of climate change is making the government
more open to green product development. The country is mountainous with a
coastal plain. Remaining natural forests are confined mainly to uplands. Government
is centralized but provincial authorities have considerable power; there are many
state-owned banks and enterprises (e.g. plantations and mining). Forests come
under the Ministry of Agriculture and Rural Development rather than the Ministry
of Natural Resources and Environment. There is a tendency to focus on intensive
plantations. The country is vulnerable to climate change, particularly in deltas and
from water stress in the central highlands. The government is aware of climate
risks and supports developing sustainable forest products. There are many
climate change policies and commitments, e.g. the UNFCCC Clean Development
Mechanism (CDM), various green growth and sustainable development initiatives
including Climate Smart Agriculture, REDD+ preparedness, and a payments for
ecosystem services (PES) sector34 along with a new social enterprise law. It is too
early to see how well these will be applied in practice.
Vietnam also has a young, highly entrepreneurial population and interest

in green production is growing fast. Despite a strong centralized government,
entrepreneurship is deeply rooted in Vietnamese culture. Half the population is
under 30 and there is a rapid increase in start-up enterprises. There is already

interest in cleaner production and some voluntary certification (e.g. of organic

food). This is still largely but no longer exclusively NGO-driven and does not
really impact deforestation and forest loss. Investment is emerging from the
private sector (mainly from outside the country for conservation led investment),
donors linked to both business and agriculture, and state-owned banks, if
instructed by the government. Efforts are hampered by poor market readiness,
a focus on small projects and restrictive policies on foreign investment. Other
problems identified include lack of a landscape-scale monitoring framework for
sustainable forest products and difficulties accessing finance for green enterprise.
Nonetheless, experience suggests it is easier to find funds than bankable projects
and collaboration with the government is essential, including at local level.
Efforts to develop green Indonesia: has decentralized governance of variable quality; although
policies exist to support sustainable forest management, implementation
business models exist
is generally poor. Indonesia has a decentralized, fragmented government
but these often struggle with strong regional variation. Deforestation is a major regional political issue
to compete with existing because of transboundary and local smog pollution; the 2015 burning season
industry without continuous was acute. The regulatory environment is complex; instruments are in place
reliance on donor for forest protection, prevention of plantation licences on indigenous people’s
funds or subsidies. territories and legality of timber, with support from donors such as Norway, but
implementation remains patchy. Conversely, some policies, such as a ban on
exporting unprocessed rattan, have depressed alternatives to palm oil and the
law still allows a certain amount of slash and burn, causing further deforestation.
The existing infrastructure and business environment supports mainstream crops
such as palm oil and rubber, and business brokers tend to be village leaders or
politicians, making it difficult for others to take an initiative.
Efforts to develop green business models exist but these often struggle
to compete with existing industry without continuous reliance on donor
funds or subsidies. There has been some success with certification of wood
legality in community projects and with community forest certification, such as
an FSC scheme in Sulawesi.35 Other sustainable forestry schemes exist, such
as the Katingan Peatland Restoration and Conservation Project in Kalimantan,
producing rattan, furniture, honey and possibly grass for biomass.36 Innovators
face many barriers, including lack of knowledge about alternative business
models and connections to markets, experience of good governance, lack of
scalable projects and limited access to start-up capital. Investors exist, including
some impact funds. Many donors are active. Local banks are conservative
and generally reluctant to fund micro-enterprises, with investment actually
declining; but regulations now state that banks must channel at least 20 per
cent of their credit portfolio to the micro and SME sector until 2018. Crowd
funding is growing. No formal business incubators were found in Kalimantan
although NGOs and universities do provide some forms of incubation support.
There are many technology incubators in Jakarta, but with a limited interest
in agriculture. There are a number of concessional funds focused on micro-
enterprise development, but a lack of high-quality investable projects. Investment
opportunities require risk capital and development support to be profitable
enough to compete with palm oil.
Nepal: political turmoil and centralized government have hampered

social enterprise, although recent new laws and policy initiatives give
grounds for hope that this could change. Years of political instability
linked first to a Maoist insurgency and then to a Madhesi uprising in the Terai,
unofficial border blockades, and a centralized but weak government, have
hindered policy-making. The government forestry department is often in
conflict with local communities. Many migrants from hill regions have settled

in the Terai. India continues to exercise a strong influence on development

and attracts many young migrants from Nepal. Changeable and sometimes
unsuitable economic and industrial policies and powerful, poorly coordinated
state agencies hamper micro-enterprise. There are high regulatory barriers and
businesses face demands for both legal and illegal payments. Around 17 per
cent of the Terai is in protected areas and this is likely to expand, along with a
strong government focus on climate change and carbon. Green growth policies
are highlighted in the National Adaptation Action Plan, proposals for the Clean
Development Mechanism and policies on rural energy, wetlands, forestry and
biodiversity. Protected area buffer zones offer many opportunities for ecotourism.
A national REDD+ strategy is being developed. There is no established legislative
framework for PES but this could emerge through REDD+ or similar. Stakeholder
roundtables and think tanks address climate issues.
Many micro-enterprises exist but these are frequently donor-driven

and social enterprise is just starting to gain momentum; few support
structures exist. There are over 40,000 forest based micro-enterprises.
Two thirds are linked to timber and others to NTFPs, ecosystem services and
ecotourism; there are 35 bioenergy projects and two forest carbon initiatives.
These community forestry projects have been shown to boost rural incomes
and improve forest condition. Many actual or potential support structures exist
including NGO, market-based, multilateral agencies, schools and universities,
governments, incubators and accelerators. However, the social enterprise
concept is quite new; of about 50 social innovators roughly half are for-profit
ventures, focusing on medicinal/non-medicinal herbs, tea/coffee and alternative
energy. Other partners include green business initiatives and forums, but most
are based in Kathmandu. Years of large donor inputs have created a dependency
culture. Impact investing is limited and problems remain with start-up capital.
Many donors focus on agriculture although some private investors and local
banks support micro-enterprises. Success in innovative businesses is further
hampered by lack of business skills, poor transport infrastructure, problems
linking products to markets, strong competition from India and China, and lack
of monitoring and evaluation.
Landscape programmes
The Paris Agreement has committed all signatory
governments of the world to reducing emissions
sufficient to limit global temperature increase to a
maximum of 2 and if possible 1.5 degrees Celsius.
As a primary means of implementing the agreement, the Intended Nationally
Determined Contributions (INDCs) of Nepal, Vietnam and Indonesia have all
identified landscape approaches – generally at a jurisdictional scale – for reducing
emissions and promoting low carbon economies.37 These signal government
commitment to improving forest and agricultural management across large
areas of land and establishing enabling conditions for investment in sustainable
resource production.
Vietnam’s largest climate programme aims to achieve improved land use

planning, sustainable forestry and biodiversity protection in the six provinces of
Lao Cai, Bac Kan, Ha Tinh, Binh Thuan, Lam Dong and Ca Mau; some of these
provinces include the biodiversity rich mountains of the Central Truong Son area
around the Annamite Mountains.38

Indonesia’s target to reduce emissions by 26 per cent (and 41 per cent with
international assistance) by 2020 is to be achieved in part through Province-
level green economy programmes. A US$144 million jurisdictional programme is
planned for East Kalimantan, building on the provincial low carbon development
strategy and transforming forestry and agricultural production as well as
strengthening existing licensing and enforcement systems.39
Nepal has initiated a programme to restore forests across 12 Districts of the Terai
Arc. The programme tackles drivers by improving the supply of forest products
(through improved forest management), reducing demand (by expanding biogas
and improved cook stove programmes) and dependency on forests (through
creating alternative livelihoods). It will deliver major biodiversity benefits, through
protecting critical tiger and rhino habitat and investing in tourism.40
Land area Forest Population Estimated

M ha area M ha M reductions 2025
MtCO2e
Indonesia (East 12.7 8.6 3.5 34.2
Kalimantan)
Vietnam (Central 5.1 2.3 11.0 12.04
Annamites)
Nepal (Terai Arc) 2.3 1.2 7.6 14.0
Subtotal 20.1 12.1 22.1 60.24
Table 1: Summary of landscape programmes (from ERPINS in each landscape)
REDD+ programmes are These jurisdictional REDD+ programmes are becoming one of the most common
becoming one of the most strategies for implementing national climate agreements and in most cases are
being rebranded by governments as green development or green economy
common strategies platforms. The core element of each is a plan to reduce deforestation against
for implementing national an agreed baseline, with payments made to actors based on performance
climate agreements. in achieving emission reductions. Importantly these are all intended to be
embedded within local administrations and driven in partnership with local
government, corporate and civil society stakeholders. Requiring agreement at all
levels of government and across the range of stakeholders working in the region,
they aim to create a stable policy environment that reduces risks and creates
incentives for investments into sustainable land and forest use.
The World Bank and UNREDD have been catalysts in most of these programmes
with the Forest Carbon Partnership Facility Carbon Fund currently the leader in
jurisdictional REDD+ investments. However a range of new investment funds,
not least the Green Climate Fund (see Annex 1), are coming on line following the
UNFCCC Paris COP to support landscape scale and sectoral actions for low
carbon economies. The Impact In the Forests initiative has chosen to investigate
impact investment opportunities within landscapes that are the focus of these
earliest investments in order to examine how these climate and sustainable
land use programmes will support impact investment and to investigate the
mechanisms for blending public and private finance

© © Sumanth Kuduvalli / Felis Creations / WWF
Field observer equipment lined up ready for early morning collection (including GPS and smart phones),
Chitwan National Park, Nepal.

OPPORTUNITIES FOR INNOVATION

Opportunities for innovation were explored, both
theoretically by constructing hypotheses, theory
of change and taxonomy of innovation actors; and
practically by identifying potential sectors, investors,
innovators and connectors.
Innovation analysis: Hypotheses

The Impact In the Forests initiative rests on five fundamental hypotheses, the first
three of which were investigated during the research phase and the last two will
be explored through applying innovation case studies within the landscapes in
the next phase:
1. There is local interest and potential for developing innovative solutions

tackling deforestation that goes un-nurtured due to lack of supportive
infrastructure and entrepreneurial community.
2. Impactful solutions exist but do not reach scale due to lack of innovation
systems to support acceleration, scaling and investment readiness.
3. There is demand-side interest in financing such solutions but this fails to
translate into investment because of insufficient “quality” deal flow and poor
product structuring.
4. An end-to-end, comprehensive approach will overcome obstacles that more
narrowly focused initiatives face by covering the entire innovation funnel,
identifying effective models, and advancing impact metrics.
5. Sustainability of the overall initiative will be attainable through a strong
community platform (with a sustainable business model), programming that
recovers costs, investment vehicles that generate return on investment and
enduring changes to the policy framework.
Building interest and Interest and potential: there is some evidence that businesses can play a
positive role in addressing deforestation, but these ideas are still in the early
creating incentives in
stages of development. In many instances, while there was an active start-up
the specific issue of scene in technology that had positive impacts on health and other aspects of
deforestation within the the environment, this apparently had little relevance to addressing deforestation.
local business communities That said, some relevant projects were found in each country and there is
will therefore be an early growing interest among local business communities. Building interest and
creating incentives in the specific issue of deforestation within the local business
task of any project.
communities will therefore be an early task of any project.
Scale of innovative solutions: there was agreement amongst experts in all the
countries that there was little focus on how innovation and entrepreneurialism
can be harnessed for forest and agricultural issues. The more general concepts
of social enterprise and impact investing were beginning to be recognized, to
an extent that varied between countries; support was needed in accelerating
innovative solutions. In Indonesia, the main analysis focused on Kalimantan,
although there seemed to be some more positive examples in other parts of the
country (e.g. Java and Sulawesi).

Financing options: various general and country specific financing options were
identified: from climate finance in Vietnam (although it is still unclear exactly how
these funds will be accessed); through concessional funding available to support
new businesses in Indonesia; and through donor-supported programmes in
Nepal. In all the countries lack of funding was identified as a constraint in that
projects were heavily reliant on donors, with commercial financiers generally
being wary of “green” and “innovative” businesses. Financing for conservation
seems to be predominantly from sources external to the country, particularly the
donor community, although there is gradual development of domestic sources.
In Vietnam, returnees (i.e. Vietnamese raised abroad) are investing in innovations
and start-ups. Greater involvement is needed from mainstream finance such as
impact investment and commercial finance to have impact at scale.
Towards a conceptual model for scaling green enterprises: an initial

conceptual model is proposed for testing, describing how such opportunities
could be used to build successful social enterprises that address deforestation,
at a landscape scale. First steps include identification, filtering and selection
of projects within a landscape, including both existing projects that could be
scaled up and new project opportunities. As part of the process it is important
to create a community of actors prepared to collaborate and support such
activities; identify investment opportunities and set relevant metrics. Next,
appropriate partners should be brought in, including, where suitable, business
support services in the form of accelerators, to help ensure that projects become
economically viable and can be scaled up to have a major impact on reducing
deforestation. Impacts are measured, lessons learned and where necessary new
approaches tried. Once successful, the model can be replicated in other parts of
the landscape and in other geographies.
• Registry • Business
• Mainstream financial development support
sources • Incubation
• Inform and share • Capacity building
• Community LANDSCAPE DEAL • Recruitment
• Label • Management
Coordinate Accelerate
and innovate
POLICY
Learn and report Fund and scale up
• Environmental
STORY • Identify marketplace
and social impact REPLICATE SCALE • Channel
• Communications • Credibility
Figure 1: A conceptual model for Impact In the Forests

The success of the model depends on the ability to identify and scale new or
hitherto small ventures into operations that make a landscape-scale impact.
Scaling up routes could be, for instance:
• Across geographies, bringing many different small-scale operations into a

single sustainability-oriented supply chain as is being discussed for rubber
in Sumatra;
• Along trade chains and value chains for instance with cocoa, building
added value for products from plantations that do not contribute to
deforestation;
• Through cross-industry coordination, as with certified timber and
wood products;
• By adding a technological component to boost efficiency, such as
introducing electronic surveillance methods to prevent illegal logging and land
use monitoring;
• By innovation, developing new supply chains etc., such as building demand
for high quality chocolate products, or new pharmaceutical and cosmetic
products from certified essential oils (white label / own brand);
• Through creating new markets, e.g. for certified produce (protecting high
carbon stocks, supporting biodiversity corridors, ensuring zero deforestation
in the production);
• By providing access to new markets, both in the context of products
(e.g. supporting links to new buyers) and financiers (e.g. connecting with
impact investors).
Social enterprises face the challenge that some commercial activities that cause
deforestation, such as palm oil, are more profitable than competing sustainable
enterprises. Here, national and landscape planning are needed, that take account
of wider societal needs such as ecosystem services; social enterprises then play
a key role in maintaining livelihoods in these regions. Different regions will have
different solutions. Financial incentives may be needed to cover some of the risks
that the private sector is still unwilling to take.

CASE STUDY
© Simon de TREY-WHITE / WWF-Canon

MAP – Sustainable
travel enterprise,
Nepal
Encouraging
sustainable tourism
as an alternative to
deforesting activities
Girl working at her house in the biogas
village that lies in the buffer zone of Chitwan
National Park. Nearly 90% of the village has
installed biogas (methane produced from
cow dung and human waste), funded by
WWF, replacing firewood for all their cooking.
Business model: a sustainable travel social enterprise, founded in 2013 with

support from Traveler’s Map in Korea. Start-up funds came from the Korean
government. The enterprise is based around community-based tourism, providing
support for villagers to provide good quality home stays in six villages. The
company provides training for guides on sustainable tourism, and helps to
establish sustainable travel packages in Nepal, along with campaigns and field
trips to promote sustainable tourism. It is part of the Social Enterprise Activation
(SEA) Centre and is mainly focused on Korean visitors. The enterprise was
working well before the 2015 earthquake but is currently struggling due to a
general downturn in tourism. In December 2015, MAP and SEA agreed to keep
working together and are currently developing plans to restart the business model.
Environmental model: encouraging tourism that relies on a healthy ecosystem,

and does not degrade natural forests.
Social model: provides regular income for villagers through homestay

enterprises, along with training for a proportion as guides.

Taxonomy of innovation actors

Innovators are all those who help generate and
implement new business ideas and can include
entrepreneurs, academics, and visionary community
leaders. In this case, innovation is aimed at finding
business models that reduce deforestation.
Figure 2 illustrates a taxonomy of innovation actors. The overarching laws
and policies that shape the nature of innovation in any country are set by
governments, which are in turn influenced by international binding and non-
binding agreements including under bilateral and multilateral processes such
as the UNFCCC and the Convention on Biological Diversity (CBD). Innovation is
heavily influenced by the opinions and capacity of existing institutions and major
programmes such as those associated with addressing climate change. These
require financial resources to implement, which can be mobilized through local
and international private sources including banks, Foreign Direct Investment
(FDI) and, depending on the country status, from multilateral or bilateral donors.
Where they exist, entrepreneurs can also draw on a support structure such as
incubators, government supported innovation facilities, and academic institutions.
When innovators attempt to tackle issues such as deforestation, it is particularly
important that they interact with other stakeholders.
Government International
POLICY
Incubators
Private
Enterpreneurs INVESTMENT
SUPPORT
Connections
ACTION
Forest users
Public
Academic
LOCAL CONTEXT
Institutions Programmes
Figure 2: Taxonomy of innovation actors (these may not be mutually exclusive)
When innovators attempt to tackle issues such as deforestation, it is

particularly important that they interact with other stakeholders.

© Gerald S. Cubitt / WWF-Canon
Coastal landscape in Meru Betiri National Park. East Java, Indonesia.

Innovation analysis: sectoral analysis

Researchers identified a range of actual and potential
business opportunities in the three landscapes, which
are summarized in Table 2 below.
Sector Vietnam Indonesia Nepal

NTFP Honey, rattan, bamboo, Sustainable forest Herbs: medicinal,
unprocessed resin, medicinal herbs41, products including rattan aromatic
major income source for and sugar palm43
some rural families42 Bamboo, honey44
Processed Export value of products Cosmetics, essential Hand crafted
forest products from rattan, bamboo and oils46 paper, handicrafts,
rush almost US $200 furniture
million in 200445
Food production Agroforestry47, agriculture: Mixed agroforestry Agroforestry49
coffee, bamboo, organic for local community
rice, pepper livelihood needs: e.g. a Coffee
project in Kalimantan.48
Aquaculture
Tourism Ecotourism is a growing Ecotourism operations Ecotourism52
part of the tourism exist through Indonesia51
industry in Vietnam50
Ecosystem PES schemes for water PES schemes exist 10 existing PES
services already exist both in pilot in several parts of schemes in Nepal,
phase53 and some larger Indonesia, options being 5 covering water55
scale schemes assessed in Kalimantan54
Energy Energy efficiency Biogas and other Energy efficiency
household energy
Renewable: biogas, solar projects56 are being run Renewable: biogas,
throughout Kalimantan solar
and the government has
plans to increase these57 ICS58
Materials Pressed bricks Pressed bricks59 Pressed bricks
throughout
Nepal (but large
social questions
associated60)
Table 2: Sectoral analysis of the landscapes in Impact In the Forests
While all these present opportunities, not all will be capable of scaling up to the
level that will create significant impacts in addressing forest loss. Handicrafts such
as hand-made paper fall into this category: important for individual households
or villages but not capable of generating a volume of trade to be scalable. Others
might in theory be sufficiently scalable from a business perspective but doing so
would impact on their sustainability and on the ecological quality of forests: many
non-timber forest products fall into this category.61
Key business filters were introduced to focus down onto the most useful sectors:
involving potential for at least a million hectares of forest involved and at least a
million dollars of traded goods; other possible filters include a million tonnes of
CO2 emissions reduced, 1 million tonnes of commodities certified as sustainable,
or a million forest users impacted.
Using these filters, a short list of sectors was identified that had potential for
significant scale (alone and in combination):

• Rattan: particularly in Vietnam and Cambodia through a new FSC

certification scheme for rattan62
• Medicinal plants: particularly in the Nepal Terai63 where there is already a
major trade
• Cocoa: focusing on Indonesia and coordinating along trade chains
• Rubber: a potentially very large scheme in Sumatra (Indonesia), based
around sustainability standards64
• Essential oils: in Indonesia
• Low carbon technology solutions: such as cook stoves, biogas and water
purifiers in the lower Mekong region and Nepal.
The short list now needs to be further assessed to judge the likely social and
environmental impacts and thus the suitability for being scaled up. A number
of corporate partners were identified including IKEA and Michelin. In addition to
WWF, Impact Hub, Ennovent and Clarmondial, potential local partners have been
identified in each landscape and will hopefully be included in the initiative.
© Raphaele Deau
Woman harvesting latex, Eastern Plain Landscape, Cambodia.

CASE STUDY
© Raphaele Deau
AHP Herbal
products, Nepal
Sustainable products
that increase
natural forest value
and reduce forest
degradation
Rice field terraces, Himalaya, Nepal.
Business model: A Corporate Social Responsibility (CSR) venture, started in

1998 to sell herbs and organic products, mainly from small traders. Products
include cultivated crops and species collected from the wild on a sustainable
basis: coffee, basil, citronella, anthopogon oil (Rhododendron anthopogon), bael
nut (Aegle marmelos), chiuri or the butter tree of Nepal (Diploknema butyracea),
etc. The company provides technical backstopping and marketing expertise.
Environmental model: a combination of sustainable harvesting and cultivation

reduce pressure on the forest, while simultaneously increasing incentives to keep
natural forests in place.
Social model: by providing marketing advice, AHP helps community producers

to move from mainly production for domestic consumption to regular trade and
increased income.

Innovation analysis: Innovators

The extent to which the three landscapes already
possess a large enough reservoir of innovators to
create major projects remains largely untested.
Vietnam has a naturally entrepreneurial culture, despite decades of centralized
government, although little of the resulting effort is currently aimed at
deforestation issues. Institutions such as the Climate Innovation Centre, Lotus,
Vietnam Clean Production Centre and the Vietnam Silicon Valley are all hosts to
strong innovators within the country.
Indonesia has a number of businesses that have become locally successful

launched by entrepreneurs (including several in the palm oil industry). There
are also a number of Indonesian-based entrepreneurs focusing on social and
environmental impact initiatives such as Kakoa, a local chocolate company,
and East Bali Cashews. However, communities in the forest landscapes are
disadvantaged when it comes to building impactful innovative businesses, due
to their geographical isolation and market access.
In Nepal, there is a recent history of innovation in the management of natural

resources and in ecotourism, and the community forestry model has gained
global recognition. But in a wider sense innovation and entrepreneurship are new
to Nepal, and development in this domain only started recently. There are a few
recognized social innovators: for example, Hampaal Allo Tatha Kapada Bunai
Udyog, Alpine Coffee Estate Pvt. Ltd. and Alternative Herbal Products Pvt. Ltd.
Innovators can also receive support from donor-funded programmes, such as
MSFP’s (Multi Stakeholder Forestry Program) Innovation fund. Further research is
needed to judge how successful these innovators are in building green businesses.

CASE STUDY
© Eng Mengey / WWF-Canon

Sustainable rattan
production in Lao
PDR
FSC certification
encourages forest
protection and high
value for rattan
products
Middleman purchasing rattan products made

by local villager and supply to local market at
Kampot province, Cambodia.
Rattan resources are declining rapidly in all countries for which information is
available, due to loss of its forest habitat. Concurrently, imports and profits from
rattan products are also both declining. Stronger legal frameworks and credible
certification systems were both identified as important steps towards redressing
this situation.65
In Lao PDR, rattan-rich forests are declining due to illegal logging. Starting in
2007, WWF worked initially with four villages to develop a sustainable rattan
harvest and to introduce the concept of sustainable forest management. IKEA
supplied a market for certified rattan products. In the absence of existing
standards, the Smartwood Generic NTFP Addendum and Lao Sustainable Forest
Management Standards were both used to develop a rattan FSC standard. The
Lao Department of Forestry assessed the standards in 2011 and brought the
villages into the FSC – Department of Forestry group FSC certificate, pending
audit. In addition, one company developed Chain of Custody certification for
rattan, a world first.66 Initially 1,504 ha were certified;67 by July 2014 some 33,392
ha of forest had been certified in the country, with rattan associated with around
a quarter of that total.68 Villagers reported an increase in both rattan and wild
animals in certified forests.69 WWF is now building on this experience to develop
similar systems in Cambodia.70

Innovation analysis:
Investors and revenue models
There are a growing number of investors in all three
countries, although few appear to be focusing on
deforestation issues specifically, and enterprises
linked to social impacts and impact investments
are not common.
The majority of labelled sustainability-focused investment originates from outside

the country, and Foreign Direct Investment (FDI) flows are important in all three
countries. For example, investment in Nepal was around US$17.3 million up
to April 2015, through a wide variety of sources but principally as direct foreign
investment (US$16.1 million); this is expected to rise to US$54 million in the near
future.71 All three countries have at least one private social investment company
or impact fund that focuses on environmental issues. Multilateral donors are
present in force including the World Bank, Asian Development Bank and
European Union. Bilateral aid, much of it directed to the agricultural and forestry
sectors, is also common and often includes a focus on building sustainable
businesses. Over time new funding options such as the Green Climate Fund may
become relevant.
Local banks and microfinance institutions (MFIs) are generally conservative and
apparently less willing to loan money to small, socially-driven start-up initiatives.
State banks in Vietnam will support projects but only if instructed to by the
government. Banks in Indonesia have an obligation to loan a certain proportion
of money to agricultural enterprises but are reported to be failing to meet targets
in this regard. Nepal has a very large number of banks, a proportion of which
will make loans to microfinance projects, but lack of finance was identified as a
major barrier to innovation. Like Indonesia, the Central Bank of Nepal has made
it mandatory for banks to lend to the agriculture sector, but many have still been
unable to meet targets and remain wary of lending.
The overall picture seems to be one in which private financing of such activities
is in theory present but in reality has accompanying criteria that few start-
up deforestation-free initiatives would meet: including return on investment
expectations, collateral/security requirements to access finance, track record,
management capability and demonstrable impact value with credible monitoring
and evaluation. Foreign investors are often put off by complex and changeable
regulatory environments, which hamper potential exit strategies; relatively poor
local corporate governance and lack of transparency; by the generally small size
of the markets and lack of liquidity, and by a lack of investment readiness in terms
of management competence, capitalization and in some cases few properly
constituted companies. However, some impact-first investors, already active in
social sectors, are increasingly considering environmental issues. These may
be more suited to the types of initiatives identified through IIF, as they may have
a specific mandate to support impactful activities. Potentially relevant investors
identified in the three landscapes are listed in Table 3.

Investor Vietnam Indonesia Nepal

Private Lotus Impact LGT Venture Philanthropy, Dolma Impact Fund
Unitus Grassroots Business One to Watch
Fund, Unitus Impact,
Insitor TriLinc Global Impact Tara Management
Impact Investment Fund, Lundin Foundation Beeds Investment
Exchange Asia (IIX) Business Oxygen
Emerging Market Biruwa Ventures
Investors (part of EMC)
Platinum Ventures, etc.
Donors and VCBF (DFID and SNV) All bilateral donors and DFID
NGOs largely Green Credit (funded by large NGOs exist in the GIZ
funded by Swiss Dev. Corp.) country
donors ADB
LGT
Global Alliance for Clean
Cook stoves (GACC)
EnDev
REEEP
Donors on World Bank (InfoDev and World Bank including IFC Asia Development Bank
AFOLU: FCPF) Asian Development Bank (projects on raising
multilateral European Union income, high mountains
European Union farming)
FAO IFAD World Bank
IFAD
European Union
ADB
IFAD
Donors on USAID (United States) DANIDA (Denmark) Multi Stakeholder
AFOLU: GIZ/KfW (Germany) GIZ (Germany) Forestry Prog. (Finland,
bilateral Norway, UK)
AFD/FFEM (France) AFD (France)
USAID Hariyo Ban
SDC (Switzerland) Green Prosperity Fund project (United States)
JICA (Japan) MP3 (UK)
AusAid Food security
Finland project (Australia)
Norway
Donors on SNV (Netherlands) IDH High Value Agriculture
AFOLU: Product: SNV
private and (Netherlands)
NGO
Banks Techcom Bank Mandiri, Bank CIMB Banks mainly interested
Asia Commercial Bank Negara, Bank Rakyat in hydroelectric projects
Indonesia, Bank Central but some also loan to
Vietnam International Asia, Bank Permata, small businesses, e.g.
Bank among others NMB Bank, Sanatha,
Agribank
Bank of Kathmandu
Microfinance institutions: Mega Bank, Bank Nepal
VisionFund Indonesia,
Amartha Microfinance, Laxmi Laghubitta Bittiya
KOMIDA, PT BDR Dana Agricultural
Mandiri Bogor, PT Dana Development
Mandiri Sejahtera, TLM,
among others Nepal Bank Limited
Sunrise Bank
Also microfinance loans:

Mahila Udhyamshil
Karja, Krishi Karja,
Civil Bank
Table 3: Analysis of investors in the three landscapes

Innovation analysis: connectors

Connectors are individuals, organizations and networks
that can help start-up companies throughout their
journey from idea and prototype to running operations
at scale.
Potential connectors were identified in each country, but analysis differed
between the three landscapes and it was also clear that there was generally
a concentration in the capital cities or other major centres, with less expertise
in the three landscapes under consideration, which are all largely rural.
In Vietnam a range of NGO-based connectors were identified including Inclusive

Business Accelerator by SNV, Vietnam Business Challenge Fund by SNV and
DFID, CSIP and Nexus for Development; some multilateral institutions, including
the World Bank’s Climate Innovation Center;72 and some market-based options
including Lotus Venture, the Hatch Programme and Impact Hub Phnom Penh.
Vietnam also has an emerging innovator market and some domestic connectors
such as the Vietnam Clean Production Centre and the Vietnam Silicon Valley.
Indonesia identified a similar range of NGOs, and additionally

pointed to the IDH sustainable trade initiative, GIZ, SNV
and the Ford Foundation as potential connectors.
Nepal currently has only a handful of connectors trying to address on the

ground issues, with most of the effort still occurring in Kathmandu. It also
lags behind in the availability of business development service providers.
Nonetheless, a range of innovator-based connectors exist, including the Surya
Nepal Asha Social Entrepreneurship Awards (Change Fusion), Foundation
Nepal, The Schwab Foundation, Nepalese Young Entrepreneurs Forum,
Federation of Women Entrepreneurs’ Associations Of Nepal (FWEAN),
Sarbodaya Fund, and Entrepreneurs for Nepal. Additionally, a range of
forestry-based institutions were thought to be possible connectors, such as
the Federation of Community Forestry Users (FECOFUN), Nepal Foresters’
Association, Jadibuti Association of Nepal (JABAN), Federation of Forest
Based Industry and Trade, Nepal Herbs and Herbal Product Association.
A number of these organizations are identified as valuable potential

implement partners.

CASE STUDY
© Nexus for Development

Hydrologic,
Cambodia
Providing filters to
clean drinking water,
replacing fuelwood
and boosting health
Woman producing the clay container of
Tonsai water filter, Cambodia.
Business model: Hydrologic is a for-profit company manufacturing and

distributing water filters to low income families in Cambodia. Originally set up
in 2001 by the NGO iDE on a cost recovery basis, it began transitioning to a
private social enterprise in 2008, registering in 2010. Production and sales were
scaled up with support from a private investor, a micro-credit scheme, and
carbon finance facilitated by Nexus for Development based in Phnom Penh (Gold
Standard carbon credits sold on the voluntary market). The business became
profitable in 2012, remaining so today.
Environmental model: filters replace the practice of boiling water, often using
charcoal or fuelwood, the first driver of deforestation in Cambodia. Hydrologic
estimates that its filters replace 49,000 tonnes of wood/year, equivalent to 230
hectares of mixed woodland, and avoiding 95,000 tonnes of CO2 emissions/year.73
Social and cultural model: 400,000 filters have been sold until 2015, affecting
around 2 million people, with over half the customers earning less than US$2.50
a day and buying on credit. Reduction in fuel costs, time spent collecting
fuelwood, improved air quality and the health and financial costs of avoided
diarrhoea save households on average US$73/year.74 78 per cent of those who
previously boiled water report less exposure to smoke.75 Women play a strong
role in the company, particularly in marketing.
Futures: the Hydrologic experience is now being replicated by TerraClear in Lao

PDR; another stage in scaling up, this time across national borders. Hydrologic
aims to have filters in a million households by 2020.

© Michel Gunther / WWF-Canon
Villagers thatching a roof with local grass cut in the buffer zone of the Royal Chitwan National Park, Nepal.

NEXT STEPS
In the next phase of the IIF initiative (to be started in
2016), different approaches to value generation will be
tested, to see if and how value could be generated and
captured at a level that provides a viable alternative to
business models that promote deforestation.
The Impact In the Forests project aims for three interconnected results:
• Reducing deforestation and restoring degraded land

• Growing environmentally-responsible businesses
• Encouraging sustainable local communities
It envisages working with two kinds of clients: (1) small companies and
entrepreneurs with an interest in innovative business solutions to deforestation
that can operate as a collective or network to achieve scale and (2) organizations
that can have a large impact on forest cover at a landscape scale. Clients will
vary with location and opportunity; one potential type of relationship combining
both approaches would be a larger corporation supporting start-ups to foster
innovation.
Development in this sector is driven by a range of value propositions:
• Business solutions at scale – helping locally-successful green business

models to grow large enough to make a significant impact in terms of
reducing deforestation
• Capacity building and decision support for start-ups – providing advice at all
stages, from choosing suitable projects through to business know-how and
monitoring of impacts
• Preparing and connecting green business to appropriate finance – guiding
local innovators on appropriate financing strategies, supporting financing
preparedness and facilitating introductions to potential financiers

Expected outcomes over the

next 3-5 years
The partners in Impact In the Forests have identified a number of targets for
their future work:
• Testing innovative projects, with perhaps half of these carried forward and
a smaller number built to scale
• Developing a typology of deforestation-free business models
• Identifying a set of economic, political and cultural conditions necessary
for scaling up businesses that reduce or eliminate deforestation
• Supporting local innovators in each landscape actively developing
business solutions to deforestation
• Developing and testing selection and monitoring systems to ensure
positive conservation impact
• Developing metrics for deforestation-free businesses
• Reaching a clear understanding of how seed funds could work to scale
business models
• Developing and proving a methodology to grow the pipeline
• Agreeing a set of best practice guidelines for developing deforestation-
free business models
The IIF business model identifies two pathways, which may in some cases
need to be combined:
• Scenario 1: an umbrella organization or initiative compiles and coordinates

all existing and proposed projects and develops a comprehensive monitoring
and evaluation framework to account for their environmental and social
impacts; the best of these will be scaled up using appropriate local and
international resources as needed.
• Scenario 2: new business models will be initiated, in partnership with

businesses and where relevant, other local and international partners,
including accelerators and investors.

CASE STUDY
© Michel Gunther / WWF-Canon

Harapan Forest in
Sumatra, Indonesia
A restoration
concession turning
back deforestation in
a critically endangered
ecosystem
Royal Chitwan National Park, Terai Arc

Landscape, Nepal.
Business model: a multi-product approach along with voluntary offset

contributions. Harapan forest exists in the highly threatened lowland forest
region of Sumatra. The whole area has been logged and degraded. Burung
Indonesia (an affiliate of BirdLife International) applied for what was then a unique
restoration licence on a logging concession, creating a change in Indonesian
law. The concession is restoring forests, and utilizes carbon credits to promote
sustainable forest management. The project will focus first on generating NTFPs
and may also produce certified timber once the forest is restored. Uses include
for instance cultivation of medicinal and ornamental plants, mushrooms, swiftlets
(for soup), bees and livestock; and collection of rattan, sago, palm bamboo, agar
wood and sap.
Environmental model: four restoration strategies are in place: natural

regeneration; assisted regeneration through selective cutting to allow desired
species to grow; selective planting in natural forest; and planting framework
species in severely degraded sites to foster regeneration. Considerable research
into restoration is taking place.76 The area contains 728 tree species, 305 birds,
64 mammals including the Sumatran tiger, 56 reptiles and 38 amphibians.
Important ecosystem services include water and carbon storage.
Social model: the forest contains eight family groups of the Batin Sembilan
people who rely on the ecosystem for their lifestyle. Management is in
collaboration with these people and six surrounding villages.
Futures: the model is currently thought to be too dependent on donor

commitments to be sustainable with an estimated US$45.5 million needed in the
next 50 years. A trust fund is being established and several businesses are ready
to invest but are hampered by lack of incentives, difficulties in pursuing alternative
business streams, and continuing policy barriers.77

Next steps: Developing effective

sustainable businesses
From the in-country findings and respective
discussions, a number of common next steps emerge:
1. Agree and apply a set of filters to: (i) identify industries where the margins
are high enough to compete with existing concerns such as unsustainable
production of palm oil, Acacia, Eucalyptus and agriculture, and support the
scaling up of appropriate for-profit innovations to address deforestation; (ii)
confirm that initiatives will actually reduce deforestation without additional
environmental impacts (“safeguards”); and (iii) check that they also have
positive social benefits.
2. Agree a set of metrics for deforestation-free businesses at a landscape
scale, linked to REDD+ and green economy programmes, to ensure best
practice and avoid perverse results.
3. Identify locally appropriate core partners including local companies,
entrepreneurs, research and NGO partners, financiers and government
agencies who have an actionable interest in promoting innovative solutions
that can address deforestation in the specific landscape. Agree a common
vision and objective. This may draw on members of a multi-stakeholder
platform at landscape scale.
4. Identify revenue streams to support further scaling and a next round
of initiatives this may include payments for research, impacts, and
concessional funding to develop a financially self-sustaining model tied to
the generation of successful outcomes.
5. Build awareness, capacity and skills (i) of local groups and individuals
to stimulate development, testing and implementation of green business
opportunities; (ii) to help established industry to understand new
opportunities linked to additional reduced deforestation, and to facilitate
their access to these opportunities; and (iii) work with appropriate public
(government and donor) development partners to integrate private and
public finance effectively.
6. Provide a common monitoring and evaluation system linked to the
metrics for social and environmental impacts, leveraging existing best
practice, including climate and carbon accounting; hectares of forest
saved, sustainable forest management and legality of timber trade;
other environmental impacts; and social impacts, equality of distribution,
condition of workers etc.
7. Develop local, regional and international support to mobilize financial
and non-financial support for the identified initiatives and their champions.
8. Build a pipeline of investable and scalable projects in an incubation
model, focusing on access to market etc., as an outcome of the activities
outlined above.

Next steps: Developing filters

Success will lie in identifying and implementing
business models that really do deliver the range of
benefits required.
A set of filters will need to be identified or developed that allow clear judgements
about the suitability of projects; covering environmental and social aspects as
well as business suitability. Application of filters is illustrated in Figure 3 below.
IDENTIFY POTENTIAL PROJECT
ECOLOGICAL BUSINESS SOCUAL EQUITY

FILTER STRENGTH FILTER FILTER
NO NO NO
YES YES YES
IMPLEMENT PROJECT
Figure 3: Filters for Impact In the Forests projects
Criteria for social equity and for business suitability already exist; these will need
to be selected and applied with respect to the particular context. New ecological
filters will also need to be developed, focusing primarily (but not exclusively)
on reducing deforestation, which is quite a new aspect, and applicable at
a landscape scale. Existing site-level criteria, such as those of the Forest
Stewardship Council, will be a component of the ecological filters but will not
provide all necessary information. In Table 4 some draft criteria and indicators are
suggested as filters for IIF-supported projects.

Topic Criteria Indicators

Suitability of Business model Legal status
the business Source of funding
Service/product offered
Innovation of the project
Provision of market intelligence
Status of the project
Barriers and risks
Unique selling propositions
Revenue model
Enabling or restricting regulatory framework
Management team Relevant knowledge
profile Track record
Future hiring plans
Potential to reach scale >US$1 million/year
>1 million people affected
>1 million ha involved
Sustainability Business not reliant on continuous donations
Revenue generating with the potential to become
profitable within 3 years
Ecological Forest cover Reduction in deforestation rate in a landscape
impacts Replacement of a cause of deforestation
Sustainability of Natural Keeping within sustainable yield of any natural product
Resource Management Collection methods without harmful side effects
(NRM)
Additional site-specific To be determined per site but may include reduced
impacts pollution
Alignment with existing Alignment with forest policies

policies Alignment with climate policies
Social, Economic benefits Increase in average income among directly involved
economic communities
and cultural Job creation
impacts
Retention of rural communities
Alignment with national economic policies
Evidence of pro-poor policies
Social equitability Gender equality indicators
Youth involvement indicators
Community involvement Participatory decision-making on key issues
/ control Evidence of support from local communities
Table 4: Examples of criteria and indicators for IIF filters

CASE STUDY
© Nexus for Development

Biogas Programme
for the Animal
Husbandry Sector,
Vietnam
Massive expansion of
biogas use reducing
fuelwood use,
benefitting health
and providing crop
fertilizers
Masons training to build biodigesters,
Vietnam.
Business model: a hybrid business model, started and driven by an NGO, the
Netherlands-based SNV, which applies a for-profit business model and works
with Nexus for Development to scale up and drive investment. It operated as a
start-up from 2003-2006, with a grant from the Netherlands government, and
scaled up after that. It has been registered with a voluntary carbon credit scheme
since 2012. To date, 145,000 biogas digesters have been built and installed in
Vietnam, benefitting 650,000 people, and the programme is already operating in
over half the provinces.
Environmental model: the biogas generators replace an estimated 25,000 kg

of fuelwood a year, equivalent to 18,000 ha over the lifetime of the project.78 In
addition to energy production, use of biogas generators reduces pollution from
livestock and produces slurry that can be used as crop fertilizer. Replacement
of food and fossil fuels saves an estimated 480,000 t CO2 equivalent per year
for Vietnam.
Social model: installing a biogas generator reduces working time for women by
an average of 14 hours per week otherwise spent fuelwood collecting and lighting
and cleaning stoves, and 2,600 local people have been trained as masons and
technicians.79 The increasing practice of installing a toilet with the biogas generator
also increases hygiene and has positive health benefits. Payback period for the
generator is usually two and a half years, quickly bringing money savings.
Futures: the programme has two long-term aims: to improve the livelihood
and quality of life of rural farmers in Vietnam through exploiting the economic
and non-economic benefits of domestic biogas and to develop a commercially
viable domestic biogas sector.80 However, the business is not yet self-financing.
Currently, in anticipation of less or zero donor funding in the future, there is a
switch to a Results Based Financing model, households will no longer receive
an investment subsidy. Biogas enterprises will find their own customers, provide
and pay for end user training and quality control, provide a high quality biogas
digester and give households a warranty and biogas appliance discount. In return
for this they will receive an incentive of VND1.2 million.81

© Raphaele Deau
Illegal logging, Eastern Plain Landscape, Cambodia.

Next steps: Monitoring

Projects and businesses require monitoring to ensure
that business, social and environmental objectives
are met.
While some landscape assessment systems have been developed and applied,82
including participatory processes,83 it is unlikely that these will be an exact fit
for the kind of business model being developed and further conceptual thinking
is needed. There is consensus that monitoring the success of any particular
social enterprise needs to be tailored closely to the aims of the business;84 there
is no one-size-fits-all system. While there are standard indicators of business
success (turnover, profitability, sustainability), social success is influenced by
individual situations, and can include for instance profitability, number of workers,
gender equity, wage equity, poverty reduction and representation of minorities.
Environmental monitoring will vary depending on objectives: always addressing
forest cover and where necessary sustainability of natural resource management
and potential environmental side effects.
Measuring landscape-scale changes in forest cover and deforestation rate

presents a number of methodological challenges. First the landscape needs to be
identified; where actions are displacing deforestation at a distance (for example if
sustainably harvested timber in Vietnam is displacing illegal logging in Cambodia)
the landscape may be very large. Next, action needs to be measured in terms of
deforestation avoided. This is also complex: for instance increasing fuel efficiency
may not actually have a major impact on the amount of timber collected but instead
allow people to have warmer houses, adopt different cooking methods and so on.
A change that removes the need for fuelwood might also remove the incentive to
keep a forest in place, creating a perverse incentive. Even if the parameters are
clear there are challenges in measurement; satellite imagery will likely only give a
general idea of the status of a forest for instance. A significant number of these
elements are contained in the monitoring systems for REDD+. Since these must
be applied at both national level and at jurisdictional scale in the three landscapes,
there is the potential to use them to establish a more coherent approach to
monitoring environmental, social and economic/business performance.
Developing convincing and credible monitoring systems is an important priority.
Each project needs to be judged on its own merits

Management metrics: for-profit approaches to tackling Unconsidered NTFP commercialization creates ecological
deforestation need to ensure that they deliver what they risks86 and may have an anti-poor bias by increasing
promise, without being so rule-bound as to be unmanageable. inequality within communities.87 While successful models
As we learn more about selecting, managing and exist,88 along with principles for best practice,89
monitoring projects, emerging best practices could be sustainability should not be assumed. Similarly improved
systematized into a set of metrics for deforestation- cook stoves have not invariably led to reduced firewood
free businesses: one potential useful outcome of IIF. demand in Nepal.90 Shrimp fisheries have been a major
cause of mangrove loss,91 although shrimp harvesting can
Many potential solutions to deforestation can act also be improved by mangrove restoration under different
either positively or negatively depending on the circumstances.92 Rattan harvesting is frequently
context, management and external factors. A survey of 55 unsustainable.93 Natural resource management is therefore
NTFP projects around the world found that commercial only sustainable if it is carefully planned, managed and
extraction from the wild, without management, tends to monitored. Developing effective filtering mechanisms and
deplete the resource; and higher livelihood outcomes are planning and implementing both monitoring and adaptive
associated with lower environmental outcomes.85 management are all key factors in success.

CASE STUDY
© Zeb Hogan / WWF-Canon

Inclusive business
accelerator, Vietnam
Scaling up social
enterprises including
cook stoves and
biogas generators
Young boy holding a Bagrid catfish (small
Bagarius sp.), Tonle Sap River, Cambodia.
The IBA partnership aims to scale up private sector engagement in low-income

markets by incubating projects that initially receive donor funding. IBA is
managed by SNV Vietnam as part of a wider global partnership; it is thus a
hybrid being an NGO giving advice to the business community. IBA is involved
in many market based approaches, some of which impact on forests. For
example, Truong Giang cook stoves, based in northern Vietnam, reduce wood
fuel use by 50 per cent and their double burning action reduces emissions
harmful to human health. Approved by the Global Alliance for Clean Cook
Stoves and already selling locally, the company is now looking for investment
to scale up throughout the country.
MTX uses composite and recycled materials to build biogas tanks and related
equipment, currently selling around 9,000 a year and targeting low-income
farmers. With 2.7 million livestock farmers in Vietnam there is room for a
huge level of expansion and MTX is also seeking investors to help it scale up
its operations. Both these enterprises have the potential to directly reduce
deforestation, by increasing fuel efficiency or providing viable alternatives.

Conclusions
Recent global developments, such as the Sustainable
Development Goal for halting deforestation by 2020,
and decisions by signatories of the UN Framework
Convention on Climate Change, have focused
attention on the need to prioritize efforts to halt net
deforestation. Building businesses that support a
deforestation-free future is a critical step towards
achieving the ambitious SDG goals.
IIF has been investigating how to build an innovation ecosystem around forest-
related businesses, including identifying the roles that different actors can play
including innovators, connectors, governments, Impact Hubs, entrepreneurs,
platforms, large companies, and NGOs. It focuses on the opportunities for local
businesses to be supported in order to reduce deforestation, with an emphasis
on sustainable landscape approaches to ensure scale.94 IIF takes a commercially
informed approach in that it aims to identify and test how consortia of local and
external partners can add tangible value to promising local enterprises, thus
setting the stage for the programme itself to become financially self-sustaining
tied to successful service delivery. Building as a business from the start avoids
the dependency culture that can evolve around entirely donation-financed
programmes. And it utilizes the potential of private sector innovation to drive
positive solutions at scale.
Transparency is a fundamental requirement of this new system of working, along

with lesson learning and investment in sharing experience with partners. The
approach is based on inclusivity, for instance considering the smallest producers as
key actors in the supply chain and aiming for collaboration rather than duplication.
This report has summarized progress to date, laid out plans for the future and
also hopefully provided some inspiration and advice for others seeking to follow
similar trajectories. We hope this will mobilize international and local partners to
join us in the next phase of this journey.
Key messages to date include the need to build a deforestation-free logic into
the process of identifying suitable projects and monitoring their success or failure:
this emphasis creates some methodological challenges that the consortium
hopes to explore in the next phase of IIF. Linked to this is clear recognition of
the need and opportunity for supporting local enterprises in scaling to the
level at which they can make a serious impact in halting and reverting forest loss
(including through awareness-raising, financial and human resource mobilization).
Achieving zero net deforestation will not be easy. A surprising number of the
projects considered, whilst often providing excellent social and/or environmental
impacts nonetheless had little direct impact on deforestation. And the number of
businesses with potential environmental returns is a small fraction of the overall
marketplace. Developing deforestation-free social enterprises remains in its
infancy. But there is also a rapid and very encouraging growth of interest in the
possibilities of business models that reduce deforestation, a new generation of
entrepreneurs ready to take risks and build successful business models, and a
global policy framework that supports such efforts. Events are likely to move
quickly in the next few years. There is a huge amount yet to learn and much
focused work ahead to build an effective system for achieving Impact In the Forests.

© Alain Compost / WWF-Canon
Clearing forest on a drained peat swap near Sembuluh for a palm oil plantation. Central Kalimantan, Indonesia.

Glossary and acronyms

AFOLU: Agriculture, Forestry and Other Land Uses.
CBD: Convention on Biological Diversity.
CDM: Clean Development Mechanism of the UN Framework Convention on

Climate Change.
Connector: a skilled individual, often seconded from business, working

with start-up companies to help them build partnerships to maximize their
effectiveness.
COP: Conference of Parties; periodic meeting of convention or similar.
Deal flow: a term used by finance professionals for the rate at which they receive
business proposals or investment offers. The term may also refer to the stream of
offers or opportunities as a collective whole.
Deforestation: conversion of forest to another land use or the long-term

reduction of the tree canopy cover; Deforestation implies the long-term or
permanent loss of forest cover and transformation into another land use. It
includes areas of forest converted to agriculture, pasture, water reservoirs and
urban areas and specifically excludes areas where trees have been removed as
a result of harvesting or logging, and where the forest is expected to regenerate
naturally or with the aid of silvicultural measures. Plantations are not equated
with natural forests as many values are diminished when a plantation replaces a
natural forest.
Ecosystem services: the benefits people obtain from nature. These include
provisioning services such as food and water; regulating services such as
regulation of floods, drought, land degradation, and disease; supporting services
such as soil formation and nutrient cycling; and cultural services such as
recreational, spiritual, religious and other non-material benefits.
ERPIN: Emission Reduction Project Idea Note.
FCPF: Forest Carbon Partnership Fund linked to the World Bank.
FDI: Foreign direct investment.
FSC: Forest Stewardship Council.
GtCO2e: gigatonnes carbon dioxide equivalent, standard measure of greenhouse

gases used by the Intergovernmental Panel on Climate Change.
Ha: hectares.
IIF: Impact In the Forests initiative.
Impact investment fund: impact investing refers to investments that aim to

generate a measurable, beneficial social or environmental impact alongside a
financial return.

Incubator: a company that helps new and start-up companies to develop by

providing services such as management training or office space.
INDC: Intended Nationally Determined Contributions.
Innovation funnel: a process by which multiple innovatory ideas are filtered

through a series of steps to select one or a few for development.
Innovation system: a concept that stresses that the flow of technology and
information among people, enterprises and institutions is critical to a successful
innovative process.
Investment vehicle: any method by which individuals or businesses can invest

and, ideally, grow their money. There is a wide variety of investment vehicles and
many investors choose to hold at least several types in their portfolios.
Landscape approach: a landscape approach outlines a process for land use

negotiations (and trade-offs) among a wide range of environmental, social and
economic stakeholders. Within a conservation context, the landscape approach
reflects the priorities defined in a larger-scale biodiversity vision. It establishes
targets for maintaining/enhancing biodiversity and ecosystem functions and
services.
Landscape: A socio-ecological system that consists of natural and/or human-

modified ecosystems, and which is influenced by distinct ecological, historical,
economic and socio-cultural processes and activities.
MFI: Micro-Finance Institutions.
MtCO²e: million tonnes carbon dioxide equivalent, standard measure of

greenhouse gases used by the Intergovernmental Panel on Climate Change.
NTFP: Non-timber forest products.
Payments for ecosystem services (PES), are incentives offered to farmers,

landowners or those with traditional rights over natural resources in exchange
for managing their land and / or water to provide some sort of ecological service
(e.g. uncontaminated water or erosion control).
PES: payment for ecosystem services.
Pipeline: the development process between starting and finishing point. The
pipeline needs to be long enough – i.e. sufficient time and resources available –
to produce a satisfactory end result.
REDD+: Reducing Emissions from Deforestation and Forest Degradation (REDD)

is an effort to create a financial value for the carbon stored in forests, offering
incentives for developing countries to reduce emissions from forested lands and
invest in low-carbon paths to sustainable development. “REDD+” goes beyond
deforestation and forest degradation, and includes the role of conservation,
sustainable management of forests and enhancement of forest carbon stocks
within REDD schemes.
ROI: Return On Investment

SDG: Sustainable Development Goals.
Sustainable landscape: A sustainable landscape helps to meet the principles

of sustainable development as defined in the UN Sustainable Development
Goals. These are landscapes that can meet the needs of the present, without
compromising the ability of future generations to meet their own needs.
UNFCCC: United Nations Framework Convention on Climate Change.
VCS: Verified Carbon Standard.

Vietnam Business Challenge Fund (VBCF): a specialized fund initiated and
capitalized by the UK Department for International Development. It is designed
to help the private sector in Vietnam to develop innovative business models
that deliver both commercial benefits for a company and social impact for the
low income population. It uses Inclusive Business models to bring low income
populations into the company as employees, producers, distributors and/or
consumers.
Zero Net Deforestation and Degradation: “no net forest loss through
deforestation and no net decline in forest quality through degradation”. ZNDD
is not quite the same as no forest clearing anywhere, under any circumstances.
For instance, it recognizes peoples’ right to clear some forests for agriculture,
or the value in occasionally “trading off” degraded forests to free up other land
to restore important biological corridors, provided that biodiversity values and
net quantity and quality of forests are maintained. In advocating ZNDD by 2020,
WWF stresses that: (a) the annual rate of loss of natural or semi-natural forests
should be reduced to near zero; and (b) any gross loss or degradation of pristine
natural forests would need to be offset by an equivalent area of socially and
environmentally sound forest restoration.
This report has summarized progress to date,

laid out plans for the future and also hopefully
provided some inspiration and advice for others
seeking to follow similar trajectories.
We hope this will mobilize international
and local partners to join us in the next
phase of this journey.

Wood-cutter harvesting mangroves in Camau Peninsula. Mekong.

Annex 1: Non exclusive list of Public investment funds for forest, climate
and sustainable development.
Fund Name Donor / Investor Name

Carbon Fund World Bank FCPF
Amazon Fund Public bank/private fund: Brazilian
Development Bank
Initiative for Sustainable Forests Landscapes BioCarbon Fund- World Bank
Forest Investment Program World Bank
Green Climate Fund Green Climate Fund / Asian
Development Bank
Norway’s International Climate and Forest Government of Norway
Initiative
Land Degradation Neutrality Fund UNCCD
(from Paris COP 2015)
Landscape Fund UNEP / CIFOR
GEF 4-6 Global Environment Facility
Althelia Climate Fund Althelia Climate Fund
International Climate Fund UK Government
The International Climate Initiative The German Federal Ministry (BMU)
African Climate Change Fund African Development Bank
Congo Basin Forest Fund African Development Bank
Climate Change Fund (fund may be expired Asian Development Bank
or renewed)
Canadian Climate Fund (C2F) Asian Development Bank
Canadian Climate Fund (C2F) Inter-American Development Bank
(IDB)
Adaptation for Smallholder Agriculture International Fund for Agricultural
Programme Development (IFAD)
WCS Climate Adaptation Fund Doris Duke Charitable Foundation,
WCS Wildlife Action Opportunities
Fund
International Forest Carbon Initiative Australian Department of Climate
Change and Energy Efficiency and
AusAID
Livelihoods Carbon Fund/ Fund for Family Danone, Schneider Electric, Crédit
Farming Agricole S.A., Michelin, Hermès, SAP,
CDC Climat, La Poste, Firmenich,
Voyageurs du Monde
Natural Capital Financing Facility EIB financing and EC funding under
LIFE Programme
Indonesia Climate Change Trust Fund (ICCTF)

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© Gordon
A villager watering crops that she grows in an area of the Mekong wetlands close to the Cambodia-Laos Border

This report has been made possible thanks to:

Funders:
Climate-KIC
WWF Switzerland
Recommended citation:
N. Dudley, P. Chatterton, E. Cramer, A. Cremonesi, R. Deau, T. Havemann, H.
Hoffmann-Riem, T. Neupane, A. Safford, P. Scheuch, D. Shandilya, P. Skvaril,
S. Stolton, S. Varma. 2016. Impact in the Forest: The Potential for Business
Solutions to Combat Deforestation in Large Forest Landscapes in Asia,
WWF-Switzerland: Zürich.
Notice for text and graphics:

© 2016. Clarmondial, Ennovent, Greenworks Asia, Impact Hub, WWF.
All rights reserved.
ISBN: 978-2-940529-36-0
Contributors:
Clarmondial: Tanja Havemann
Ennovent: Peter Scheuch, Tapas Neupane, Deepak Shandilya, Sandeep Varma
GreenWorks Asia: Agnes Safford
Impact Hub: Petr Skvaril, Elisabeth Cramer, Raphaele Deau, Alberto Cremonesi
WWF: Holger Hoffmann-Riem, Paul Chatterton
WWF Landscape Finance Lab: Publication 1
Reviewers:
Chris Elliott, CLUA
Chris Knight, PwC
Richard McNally, SNV
Ben Ridley, Credit Suisse
Rod Taylor, WWF
Dang Thuy Trang, ADB
Kate Wolfenden, WWF
Report development:
Writers: Nigel Dudley and Sue Stolton, Equilibrium
Design: millerdesign.co.uk
Copywriter: Caroline Snow

ABSTRACT
The UN’s 2015 Sustainable Development Goals aim to halt deforestation by
2020. This will not be achieved by donations or volunteer efforts alone. The
Impact In the Forests initiative believes that developing successful businesses
in or near permanent natural forests is a key step to eliminating deforestation.
Such businesses need to fulfil environmental, social and economic needs:
pro-poor, guided by local communities and addressing social, cultural and
gender inequities. Businesses need to create a substantial impact, often
through a collective or co-operative approach of many small businesses or new
policies from large businesses. We define deforestation-free business models as
enterprises that can operate without directly or indirectly causing deforestation
or forest degradation and/or contribute to forest and land restoration. Working
to kick-start sustainable and scalable business models requires a new approach.
Impact In the Forests aims to:
• Identify potential suitable business models and innovators

• Accelerate innovative solutions to achieve significant scale
• Facilitate an integrated and beneficial combination of public and private
financing
• Measure impact and ensure that businesses deliver promised
• Promote success stories to users, entrepreneurs, innovators, businesses
and donors
• Connect top-down actors (institutions, policy makers, funds, etc.) and
bottom-up innovators
• Provide holistic input for policy making
• Ensure buy-in for green approaches at every level of businesses engaged in
the landscape
• Replicate successful models in other places impacted by deforestation
The ideas are being tested out in three landscapes in Asia:

• Vietnam: particularly the Central Truong Son area around the Annamite
Mountains
• Indonesia: focusing on inland Kalimantan on the island of Borneo, plus
Sumatra and Sulawesi
Terai Arc region
The report provides a situation analysis of the environmental, social and political
situation in each of the landscapes, along with the policy and entrepreneurial
context. It discusses the potential for innovative approaches in the landscapes
and provides a sectoral analysis of the kinds of enterprises that might contribute
positively to addressing deforestation. Finally, it looks at the various actors
(innovators, investors and connectors) who might be involved. Real-life examples
are cited throughout. Next steps for the project are outlined in a final section.

Impact The Forests

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Contents | Methodology | Context and opportunities | Opportunities for innovation | Next steps | Glossary and Acronyms | References

IMPACT IN The potential for business

1 | Impact in the Forests

Nazir Foead, Head,

Chris Elliott, Executive Director,

In the palm oil industry in Indonesia for example,

2 | Impact in the Forests

CONTENT All the titles below are hyperlinks -

CONTEXT AND OPPORTUNITIES 20

OPPORTUNITIES FOR INNOVATION 26

3 | Impact in the Forests

4 | Impact in the Forests

© Soh Koon Chng / WWF-Canon

The key findings are as follows:

1. Across the three focal countries and landscapes, the proportion

A range of case studies demonstrate that deforestation-free business solutions

• Biogas production to replace woodfuel in Vietnam and inclusive business

5 | Impact in the Forests

However these tend to be isolated cases and struggle against business

In Indonesia, innovators face similar barriers, such as a lack of alternative

3. A number of pathways for business scaling and aggregation were

6 | Impact in the Forests

• Across geographies, bringing many different small-scale operations into a

4. Equally valuable is the provision of support services for business model

An end-to-end, comprehensive approach will overcome obstacles that more

5. These services are provided by a limited number of incubators,

Four types of services are identified and explored:

• Innovators: entrepreneurs who develop a deeper understanding of social

7 | Impact in the Forests

• Investors: In the context of this report, investors include any organization

While each of these is individually important, our hypothesis is that the

An end-to-end, 6. Public sector investments for business development, emissions

7. Private sector investment is already available for “green” business.

8 | Impact in the Forests

capital is needed to make them investable. In the report we present a number of

8. The creation of forest friendly business at large or small scale is an

Positive progress depends on:

There is a deep cultural and understanding divide between the

9 | Impact in the Forests

© Mauri Rautkari / WWF-Canon

Woman carrying fuelwood Kerinci area Sumatra, Indonesia.

10 | Impact in the Forests

Ennovent is a global innovation company for low-income markets. We work

GreenWorksAsia (GWA) is a private company providing comprehensive

Impact Hub is a global network of entrepreneurial communities, workspaces and

11 | Impact in the Forests

For sustainable forest management to work in the long term, it should

© Edward Parker / WWF-Canon

13 | Impact in the Forests

This report defines deforestation-free business models as enterprises that can

• Identify high-potential local business models and innovators

The longer-term vision is a comprehensive business facilitation approach

14 | Impact in the Forests

© Elizabeth Kemf / WWF-Canon

15 | Impact in the Forests

As a first step towards scoping the potential opportunities, each landscape

16 | Impact in the Forests

Key Indonesia East Kalimantan Province

intact forest landscapes

Nepal Terai arc landscape

Vietnam Annamite range landscape

17 | Impact in the Forests

© Simon Rawles / WWF-Canon